As a leading UK Dairy Processor prepares to increase payouts for their milk supplies from next month, the issue of sustainable pricing for supplies looks far from resolved.

Robert Wiseman dairies says that as of next month, farmers supplying milk to its operations will receive an additional one pence for their products, amounting to a pence per litre price of 27.2 pence (€0.34).

The move has been welcomed by some as an important first step in protecting farmers, though comes amidst processor concerns over sustainable dairy payments following a number of high profile strikes by milk producers across Europe during the year.

Supply confidence

Colin Telfer, chairman of the Wiseman Milk Partnership, said that the move is a vital step in boosting confidence in the milk supply chain, a position the company claims it remains fully committed.

“Wiseman has signaled its intention to maintain momentum with its farm gate milk price and we are confident that the company will continue to meet this commitment,” he stated.

However, while welcoming growing industry commitment to farmer payouts, the dairy chairman of the UK-based National Farmers Union (NFU) claims that more must be done to protect milk supplies.

“Farmers have been calling for price increases to cover costs and allow for reinvestment for months and we are finally starting to get a response,” he stated. “Announcements from Tesco, Milk Link and Wiseman are encouraging signals that the industry is moving in the right direction - away from the commodity pricing that was so much the scourge of the industry in the past and towards much more structured, collaborative supply chains."

The relationship between dairy processors and their milk suppliers has not been entirely smooth sailing in recent months though.

Processors challenges

Just last week, Netherlands-based Zuivelcoöperatie Friesland Foods says that it had fixed the final price for its milk supplies at €37.07 for 2007 season, in line with provisional estimates announced back in May.

The group said that it had decided to keep the rate unchanged from its provisional valuation and would not be making further settlements with its dairy farmers over the costs.

The decision comes after the group became one of a number of companies impacted by farmer boycotts across Europe back in June.

Farmers' groups in Germany, Belgium and Netherlands have all became involved in protests over the last year, which have ranged from spilling milk to boycotting production, as part of calls for a higher basic pay rate for their products.

Striking a balance

Dr Joop Kleibeuker, head of the European Dairy Association (EDA) told DairyReporter.com earlier this year that striking a balance in sustainable pricing for all members of the dairy supply chain was the best means of ensuring long-term sustainable production in the sector.

Kleibeuker added that calls from some groups for a fair trade-style scheme for the bloc’s milk farmers could serve only to distort agricultural reforms designed to ensure profitability for everyone in the milk supply chain.

"The ongoing reforms of the European Common Agricultural Policy (CAP) have meant that there is no bottom in the market but also no ceiling," he said. "This is the choice we have made inEurope, and we are confident that there is a good future ahead for the entire dairy industry on the world stage."

Farming reforms

Kleibeuker conceded that with the dairy industry now working towards a system where prices paid for milk are defined by market development, costs were likely to be more volatile.

"For farmers supplying milk to the dairy industry and consumers, there are times when it is difficult to cover costs, but there are also moments when it is hard for processors as well," he stated. "We are all working within these developments, so everyone has to cut costs where possible to maintain profit."

Ultimately, Kleibeuker said that the CAP reforms were vital for ensuring farmers could cover costs in a way that ensured value for processors and consumers as well as allowing for future investment.

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